Old Navy expands sports-apparel push

Stores-within-stores, national media campaign part of retailer’s move

SamMamudi

NEW YORK (MarketWatch) — Old Navy will start a big push into the world of sports next week, as the retailer seeks to profit from the multi-billion dollar business of sports apparel and merchandising.

The retailer, a unit of Gap Inc.
GPS, -0.57%
will unveil its Super Fan Nation stores-within-stores at about 1,000 locations across the U.S. on Tuesday. The stores will sell branded goods of more than 70 Division I schools, as well as National Football League teams.

Old Navy

Old Navy plans to sell apparel to sports enthusiasts.

Old Navy is supporting the effort with a unique, seven-figure marketing campaign that will include advertising at college stadiums and arenas, in-store appearances by college bands, cheerleaders and mascots, and a 10-day national television advertising campaign.

Old Navy began selling some sports merchandise in 2009. Michelle Wlazlo, senior vice president for merchandising, said “significant” from that effort returns encouraged the retailer to invest so heavily in the latest push.

“It’s been a big driver of growth for us,” she said, but declined to provide figures.

Wlazlo said that performance, coupled with the profile and preferences of Old Navy’s customers, made the tie-up a no-brainer.

“The sports connection should have always been part of our DNA,” she said.

The goods are exclusively designed for, and sold at, Old Navy. Clothing items will begin at $14.94, while accessories will retail from $5.50.

Officials at Old Navy will certainly hope they can make the deal a success, given the struggles of its parent. Shares of Gap have dropped about 25% this year as sales have slowed, and diving into sports merchandise may boost its fortunes.

The move should also provide a boost for college athletics departments.

“There’s an opportunity to reach a different consumer here, and get more exposure for the brand,” said Craig Westemeier, assistant athletic director at the University of Texas.

By most measures, interest in college sports match that of the professional game: this year’s BCS National Championship football game between Auburn University and the University of Oregon was the most-watched game in cable television history, while 2010’s game, on network television, was that year’s most-watched sports event other than the Super Bowl.

More than 100 million people attended college sports events last year, according to the NCAA. Major League Baseball attracts about 73 million fans a year, while annual attendance for the three other major pro sports hovers at about 20 million each, according to ESPN.

The trick for both Old Navy and the colleges is reeling in customers who may not be closely attached to a college — common in pro sports, where a team’s hat or jersey is as much fashion statement as flag of allegiance.

Texas’ athletic program is among the highest revenue generators in the country with roughly $144 million in 2009-2010. Its licensing royalties were just over $10 million, a healthy chunk of the program’s roughly $13 million surplus.

But few programs are as lucky as Texas. Data from the NCAA shows that the median athletics program of a Division I school spends about $9 million more than it generates. With cuts in public funding coupled with ever-rising costs, growth in royalties could help close that gap.

That growth is unlikely to come just from Old Navy, but the deal and the accompanying marketing push should boost college licensing efforts.

“This shows, even to a big retailer like Old Navy, the value of college brands and the college marketplace,” said Cory Moss, head of the licensing division at IMG College, a division of IMG Worldwide which brokered the deal on behalf of the schools and is coordinating the marketing campaign for Old Navy.

Collegiate licensing brings in $4.3 billion in annual retail sales, less than Major League Baseball’s estimated $5 billion revenue, according to License Global Magazine. While it’s more than the estimated $3 billion seen by the National Basketball Association and $3.25 billion of estimated sales for the National Football League, the size and number of collegiate sports suggest there’s room for more.

“We think the sky’s the limit, but the only way to continue to grow is to reach new consumers who wouldn’t previous have bought our products,” said Jason Schlafer, associate athletic director at the University of Kentucky. “We’re going to a retailer whose customers walk in the door not expecting to buy college product, but who could walk out with University of Kentucky merchandise.”

The university’s athletics program generates about $5 million is merchandise royalties said Schlafer. The program overall generates about $83 million and runs a surplus.

Old Navy’s stores-within-stores will be calibrated to their locales, said Wlazlo. Each store answered a survey to help the retailer decide which teams’ products to stock — for example, 61 stores in Texas will carry University of Texas merchandise. Some of the stores will also carry NFL products.

While a store in Columbus, Ohio, will only carry Ohio State University merchandise, a store in the heart of San Francisco will stock branded items of Stanford University, the University of California at Berkeley, San Francisco 49ers and Oakland Raiders merchandise. It will also sell merchandise from University of California at Los Angeles, University of Southern California, and NFL teams that Old Navy calculates have a fan base in the San Francisco market: the Pittsburgh Steelers, Dallas Cowboys, Chicago Bears, New England Patriots, San Diego Chargers and New York Giants.

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